Interview with Kai Oistamo - insights into Nokia's strategy

Dr. Kai Oistamo - Executive Vice President and General Manager of Mobile Phones 2005-2007. Senior Vice President, Business Line Management, Mobile Phones 2004-2005, Senior Vice President, Mobile Phones Business Unit, Nokia Mobile Phones 2002-2003, Vice President, TDMA/GSM 1900 Product Line, Nokia Mobile Phones 1999-2002, Vice President, TDMA Product Line 1997-1999, various technical and managerial positions in Nokia Consumer Electronics and Nokia Mobile Phones 1991-1997.

Member of the Board of Directors of the Finnish Funding Agency for Technology and Innovation (Tekes). Chairman of the Research and Technology Committee of the Confederation of Finnish Industries EK. Member of the Board of Directors of Nokian Tyres plc.

Kai was born on September 29, 1964 in Turku, Finland. In his previous role, Kai headed the Mobile Phones business group, which offered a world-leading range of mobile phones and devices, traditionally for mass market consumer segments.

Kai joined Nokia in 1991, at the former Nokia Consumer Electronics unit, holding a number of managerial and technical positions until 1995, where he was appointed as Product Manager, Nokia Mobile Phones. In 1997, Kai was promoted to Vice President TDMA Business Line and in 2002, Kai was named Senior Vice President, Nokia Mobiles Phones, overseeing the Mobile Phones business unit.

In January 2004 he was appointed Senior Vice President, Business Line Management, within the Mobile Phones business group. In this role, he held global business responsibility for a unit that defined, developed and marketed GSM and WCDMA products.

Kai holds a Doctorate degree in technology and a Master of Science degree in Engineering from the Tampere University of Technology in Finland.

Starting January 1, 2008, Dr. Kai O"ista"mo" holds the position of Executive Vice President of the new Devices unit, responsible for Nokia’s device portfolio, Research and Development, design and related strategy. He is a member of the Nokia Group Executive Board, a position held since 2005.

Eldar Murtazin: First of all, I would like to ask you about R&D, although not about technology or your upcoming products, but rather your strategic vision of the market. The fact of the matter is that like many other phone makers, Nokia has already designed a product line for the next two years. But is there any effective way to alter it if something unexpected happens?

Kai Oistamo: I think it’s all about how you structure R&D. It’s a risky business and to a certain extent everybody needs to do it, betting on what will happen in the next two or three years. But then the approach we have taken really focuses on the platforms, which means that we only specify the things we need to do, and then keep variable the things that we can keep variable, as long as we can, so keep as many things open as possible, which gives us much more flexibility to react to the market’s trends.

I think that’s something we, compared to our competitors, started way earlier, and I think it clearly sets us apart from everybody else, and S60 would be a good example, but it’s not only S60, it’s on the hardware side, it’s on the software side just as well, really. We are building on great modularity, if you wish, so that you can actually react fast when needed.

E.M.: What is your point of view on the E-Series development – it used to be a stand-alone range, but these days it doesn’t differ from the N-Series all that much, and on top of that you have already cancelled a multitude of E-Series related projects, such as synchronization software and MS Office Document reader. Furthermore, the only difference that end-users can experience with the E-Series are several metallic accents here and there, but that’s about it.

K. O.:A while ago we emphasized that we wanted to keep our products open to the business environment. That's the primary reason why we cancelled some of our own software-related projects - if you look at the Microsoft e-mail penetration in the corporate sector today, it's extremely high, and thus support for Active Sync is quite vital. I think it is a competitive opportunity for us rather than anything else; same goes for other fields.

And I think there's more to the Eseries than just metal casings, if you look at E71's email application you'll get what I'm trying to say. It's actually a more comprehensive than in any other device, although requires certain tradeoffs as well. It is from the UI software to the keypad, and keyboard layout, so really it's optimised to operate as a mobile office. So I think the E-Series definitely offers much more than shiny pieces of metal. It's rather about the experience you get with it and certainly physical aspects are vital parts of this experience. At the same time, the N-Series, it really is all about the non-voice experience - I think it all starts from the question "who is using it today?". We have done this end-user study, and according to it over 80% of the time the N-Series users don't make voice calls or send SMS messages - they browse the Web, play games or listen to music, etc. And in this sense, the N96 with its mobile TV and a set of features that will keep its users online all the time, is just the beginning of what you're going to see over the next few years. Really, I believe that what used to be the computer world, and what used to be the mobile world are going to become industry. Our feature-rich multimedia computers becoming mobile computers - actually they have already stirred up other areas of development, through the increased capabilities and higher bandwidth access. I believe, in five years' time, the world will be a very different place.

E.M.: What is your opinion on the place of operators in today's markets? They don't pay a particularly notable role as far as Internet services go and aren't much help in other areas either.

K. O.: I think the first notion we have to keep in mind is that things happen at different speeds in different markets, so all markets have their own history and every region is unique. But I would say all operators agree with our longer term vision (that I was just laying out). I think the proof is that, really, if you look at our OVI services, we are collaborating with all major operators, around the world, especially in Europe, bringing them out, so, I think it's a collaborated effort. I would actually put it this way: the days of antagonism are more-or-less over, we have a common vision of the market these days, and it's more about tactics now, short-term goals and issues that will help us get there.

E.M.: Are you afraid of some other players coming from other industries, like Google, or Apple?

K. O.: Of course, we have to respect our competition, and be somewhat paranoid about it. On the other hand, this is just a sign of what I've been talking about, it's a convergence between what used to be the computer world, and what used to be the mobile world and a new roster of competitors is emerging as a result of this. And of course, we need to be better than these companies, carving out our own space in this industry, with our own competitive advantages. I think we are very well set to do so. I'm quite confident that if you think about the capabilities and competencies we have created for ourselves we are very well position on the market. I don't think the future is about mobile phones alone, nor is the future about PC. The future is about mobile computers, and I think we are really driving this market. And it's good to see some competition on this front - you need adversaries in order to make the market move forward. At the same time, we get a chance to collaborate with some of these players - Microsoft is a good example, it's a company we compete with and, on the other hand, we have been working together on Active Synch implementation.

E.M.: What about Nokia's strengths and weaknesses? What would you rather improve and what sides of the company are already well-polished?

K. O.: I think we have lots of strengths - in the end, it really comes down to how well you can understand consumers. It's about who catches their needs faster, who can address them more accurately. I think we have great assets in terms of both technical capabilities and software platforms that allow us to deliver exactly what our users crave for. And on the brand side, being one of the most trusted brands in the world, and then in the distribution network, we can reach all consumer groups and communicate with them in a very effective way, wherever they live or work. And I think this is one fantastic asset to have in today's market environment.

E.M.: Should we be looking forward to some substantial improvements in Nokia's position on the North American market?

K. O.: Well, of course, there are certain markets where our ambition level is much higher than what the reality is today. You know, North America is one of these markets, along with Japan and Korea, if I have to name a few. We did a fresh start with out approach to North America, though, and nowadays first products of this new wave have already started hitting shelves over there - you have to remember that the full cycle of some new product's development takes around two years. And I'm quite confident about our strategy in North America - we just have to work harder, be better, be faster, but, I think the direction we are moving in is absolutely right.

E.M.: What do you think about the development of S40 and S60 platforms? They used to have substantial differences, but these days they are being drawn closer to each other in terms of functionality and value-added features. Are you going to merge them into one platform eventually? In the sense that it will go both for mid- and high-tier offerings?

K. O.: I think they still offer different value to their consumers, with S60 being more like a PC platform, and S40 being a true phone platform. In the end, the seam has to be kind of shades of gray, so that we won't end up having a gap in our portfolio. But, the way I see it, S60 will continue moving towards PC-like and multimedia-heavy experience, whereas with S40 we'll be focusing more on decent calling features and phone functionality.

E.M.: How do you see Symbian Foundation's immediate future? Have you signed up some more developers already?

K. O.: I think it's like a gravitational point, I would say, as a business opportunity, it will suck in the attention of all the developers in the world. I don't think anybody really can afford to pass up such an opportunity here, with the Symbian Foundation making this community much, much larger than just Nokia. So I think Symbian Foundation's future is really bright, we have pushed the boundaries of S60 with this Foundation and I believe you will see the results of our work really soon.

E.M.: Getting back to R&D - you have got research and development centres in several regions, but the vast majority of Nokia's phones come without any distinctive features or abilities. There are some solutions that come with lunar calendars for China and Middle East countries, but that's about it. Are you going to introduce a higher degree of differentiation in the future?

K. O.: I think it's already happening, if you look at really the mix of that we are selling in different parts of the world - it ranges from models to form factors, to types of models that are really all the rage. If you go to North America, or Latin America, folders are still in quite high demand, while in Western Europe, it's like a thing of the past; then QWERTY - it's much more dominant in North America than it is today in Western Europe, but I think that's going to change. Look at the end-user segments, some countries being more inclined to the high involvement side, Russia being a good example, where it's, relatively speaking, more important how the device looks, how fashionable it is, what technologies are inside, while in some other countries people go for "value for money". So, markets do vary, and in this, as well as many other industries, I think our strength is that we have a full portfolio, which we can offer in different regions, giving people a wide choice.

E.M.: Other phone makers have been heavy on partnership deals with some fashion brands, but Nokia sticks to a more conservative approach on this front. You have yet to release a co-braded offering; how come you are not into this latest and greatest trend?

K. O.: So, we do use some co-branding. But at the same time if you look at us compared to some of our smaller competitors, our brand position and strength are immensely different. Basically, we are one of the most loved and admired brands in this industry. So we don't really need to attract that much more interest towards our products though co-branded phones. This kind of a starting point, of course, sets us little bit apart from someone who doesn't necessarily have much of a brand.

E.M.: What's the place of S60 5th Edition, and touchscreen phones in general, in Nokia's strategy?

K. O.:Eventually these phones will evolve into one of our primary focuses in this industry, make no mistake about that!

E.M.: Many people can't get their heads around the 5800 XpressMusic's price tag - it's just that low. But as I see it, there is a more interesting question to ask: whether it's just a one-off, or Nokia are going to implement this pricing policy into other product line-ups down the road?

K. O.: When developing a pricing policy for any given phone, you have to look at the value you create for its target audience and then you have to consider how competitive it is at this price point and with this value inside. And that's exactly what we've done with the 5800 Xpress Music, and all other Nokia-branded products are no different in this regard. Obviously, we are going to stick to this paradigm in the future, but I don't think there is really that much of a bond between this particular technology and the price we have set for the 5800 XpressMusic.

E.M.: You acquired some Linux-based developers several months ago, however we haven't heard much from Nokia about them ever since. How are you planning to develop this platform?

K. O.: Well, of course you have some progress on this front if you look at N700, N800 and N810, and we intend to continue this line-up. We even announced some big changes for the Maemo platform last month. Another important milestone is that S60 will now support QT, which is an interesting technology in and on itself that spreads across multiple platforms. It creates a huge application development framework, with which you can design really powerful graphical UI that will be portable across different device classes. QT has got a strong open community in the Internet, on PCs and now in the mobile phone industry - I think we'll hear more from similar umbrella platforms in the future. All in all, I think it's, to some extent, old-fashioned to think about operating systems in isolation, it's about, how you design the development environment for third-part companies and enthusiasts, how you enable the tools they are most familiar with and so on.

E.M.: Speaking of open-source platforms - Web Kit, that was used to build the S60 Browser, is definitely an open source solution, but what about QT? There have been a lot of speculations that Nokia are intending to close it for third-party developers, changing the very idea behind QT.

K. O.: I don't think there have been any changes in any of the QT licensing schemes, or the business models since we bought TrollTech - I can ensure you that the direction that we are going to make QT more open to the world. Absolutely, it would be foolish of us to do anything else. We see QT as a platform with a tremendous potential, not only in the mobile space, but in other fields too.

E.M.: Around three years ago Olli-Pekka Kallasvuo said Nokia was becoming an Internet company. However, I asked several people about what it really meant, but nobody could give a clear answer. Now, after all these years, can you shed some more light on that prodigious statement?

K. O.: Yeah, I can answer it, and I think it's a good story too - he dropped this phrase in an interview without actually knowing what it meant back then. After that he fully admitted that he had absolutely no idea what it meant, didn't know the details, but he knew that was the direction Nokia had to be heading. And if you think about what has happened over the past few years, it's so clear that we are moving towards a global convergence between the computer industry, and what used to be the mobile industry, and on multiple levels at that. Be it in services or technologies, they are all coming together. And mobile computers are going to be really the driving force behind Internet services, even the Internet evolution, in multiple ways, because they are so much more personal, and they are portable - I truly believe they will bring about a major paradigm shift some time in the future. So, I think, this really is about this evolution, from what used to be a phone into a multimedia computer. And speaking of Nokia, it's a new business opportunity for us - now we can actually develop our own services, embracing Internet technologies and the rules of online business-models. It's a totally new environment. In the telecom market, it's more about who implements some new standard first. But as far Internet is concerned, the only thing that matters is who gets to the market first, because it allows you to set the standards for the rest of the industry in years to come. So it's a completely different way of working - from R&D to product development, to service development, new technologies, new business-models. And I think learning all these new things has turned Nokia into a different company compared to what we were two years ago.

E.M.: What would you like to say to our readers? Maybe you want to share your point of view on something?

K. O.: I think all feedback is extremely valuable, and I really think that the media going wireless - today, your type of media is really the best way for us to get direct access to our consumers, so that we can communicate with them and learn from them. It's extremely important for us. I really encourage all of your readers to give us feedback, participate in what we do. And I think it's not only about letting us know about what you think - in fact, you get a chance to take part in all our initiatives, be it in QT or Symbian Foundation. Nokia is changing, we are becoming the leading company in many the open source driven segments. Work with us, and we will change the world together.

E.M.: Great, thank you!

K. O.:Thank you.

Eldar Murtazin ([email protected])
Translated by Oleg Kononosov ([email protected])

Published — 2 November 2008

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